Honcker’s founding story isn’t so different from other startups looking to digitize the car-buying process: Founder and CEO Nathan Hecht tried to lease a vehicle in New York and was left cold by the experience. But unlike those other stories, this one doesn’t end with a service designed to cut dealers out of the equation.
What Hecht created is a marketplace that is helping 300-plus dealers in the tri-state area of New York, New Jersey and Connecticut, as well as Arizona, Nevada, Pennsylvania, Florida, and the city of Los Angeles, acquire customers he says “they otherwise wouldn’t have had.” In October, the firm closed a seed financing round of $3.6 million — funding Honcker will use to create new features, as well as grow its dealer network, geographical footprint and customer base. By year’s end, Hecht hopes to have at least 500 dealerships in the Honcker network.
“Dealers love this,” Hecht says of the app, which the Brooklyn, N.Y.-based startup launched in October 2016. “The customer belongs to them. We don’t think dealers are going anywhere any time soon, so we really incorporated them into the process.”
In fact, dealers using Honcker are dictating that process, from setting vehicle pricing to choosing whether or not to offer F&I products to consumers through the app. Hecht, a longtime tech executive with file-sharing and virtual currency startups under his belt, believes that the flexibility of his offering works for both high- and low-volume dealers, regardless of how they prefer to sell.
“We query [dealers] often about pain points,” Hecht notes. “One thing that’s common, that everyone agrees to, is the faster and easier you can make this process — where the dealer determines, ultimately, the terms of the lease — the more compelling the proposition.”
The Honcker website proclaims that leasing a vehicle through the app is “as easy as 1-2-3” for car shoppers, who simply search for the vehicle they want, select it, and finalize their lease deal. Honcker uses Experian to run a soft credit inquiry to see what the shopper qualifies for without impacting his or her credit score. It’s a process Hecht compares to “signing up for Facebook.” When the customer clicks “Lease,” the deal is sent to at least two different dealer representatives via push notification.
“On the dealer’s side, it’s just as simple for them to process the order,” Hecht adds. “It’s ‘confirm inventory, process the credit application, confirm paperwork,’ and the car is delivered. So it’s three steps for each side, all done through the app.”
The onboarding is just as easy. Dealers simply load their inventory into Honcker’s dealer dashboard, which can be accessed through a web browser and controls everything the dealer wants happening within the platform. Honcker does offer CRM integration, but not DMS integration. Hecht says that’s because dealers “don’t want anybody touching it.” Honcker can also connect to Dealertrack’s econtracting platform, allowing dealers who offer home delivery to use an Apple iPad to finalize the customer’s paperwork.
“It takes nothing to sign up with us. It’s a very short and easy agreement, and there’s no commitment,” Hecht says. “They can sign up, turn it on and turn it off as often as they want.”
At Los Angeles-based McKenna European Auto Center, which has been leasing vehicles through Honcker since April 2017, Corporate VIP Sales Manager Noah Schmerling has found the app to be as easy to use as Hecht promises. The dealer group uses the app at its BMW, Audi, Volkswagen and Subaru stores; Schmerling manages sales at the BMW and Audi rooftops, where he and two assistants act on Honcker deals as soon as they come in, usually within 20 minutes.
“My team gets a notification, and it’s a very simple process — the credit report is already there,” he says. “We just process it like a normal deal.”
The majority of McKenna’s business funnels in through the internet, with the Audi and BMW stores Schmerling works at having dedicated internet teams to handle those leads. Honcker is the dealer group’s first foray into doing deals with consumers who never step foot into the showroom. Schmerling says the app is “kind of like the ‘Buy Now’ button.”
“By the time [customers] click on it, they are ready to rock and roll,” he says.
Of the 300 new and used vehicles McKenna BMW sells per month, about 60 fall under the jurisdiction of Schmerling’s VIP sales team, including all Honcker leases. The reason, Schmerling explains, is that it makes the process “a little extra special.” The dealer group offers a complimentary pickup service for service customers within a 40-mile radius, but Honcker users have the option of having their vehicle delivered to their door at the time of purchase, along with the final paperwork.
Hecht says that about 50% of cars leased through Honcker are delivered to the customer the same day, a service that is provided by participating dealers. But it’s not a requirement of the Honcker program, which also doesn’t tell dealers when to make contact with a customer.
Schmerling chooses to call customers as soon as the deal is processed, but Honcker can also address shopper concerns in its in-app chat feature. There’s also a nationwide toll number, 1-212-Honcker, that’s manned 12 hours a day. So if a dealer never wants to speak to a consumer directly, that’s not a problem, Hecht says.
“You have dealers who are super friendly and pick up the phone right away,” Hecht says. “You have dealers who process [the deal] through the app, but they may contact the customer. ... And then you have dealers who never speak to the customer — literally never.”
Dealers can also interact with customers on the Honcker app, which might be how the customer prefers it. According to J.D. Power’s 2017 U.S. New Autoshopper Study, 56% of internet car shoppers are now researching vehicles on a mobile device, and 42% of them are doing so on a smartphone — up from 37% in 2016.
“It’s great because everything you need, all that information, is right at your fingertips,” Schmerling says. “It’s an exciting time to be in the automotive business.”
Not all dealers would agree with Schmerling, especially when it comes to selling F&I products. But Hecht and the team at Honcker are seeing results: Just eight weeks after launching the capability to list F&I products on the app, approximately a quarter of users who leased a car also bought F&I protections of their own volition, without ever speaking to an F&I manager. The result echoes a 2015 study from Cox Automotive, which found that 63% of shoppers would be more likely to buy F&I products if they could learn about them online.
“We recognize that F&I is a profit center for dealers and it’s very important,” Hecht says. “We make sure to highlight [F&I] to the customer, and it’s effective.”
At the time he was interviewed for this story, Schmerling was in the process of adding the entire suite of Audi and BMW F&I products to his dealer group’s Honcker profile, including pricing. “You have to be upfront with pricing so [the customer] can make an educated decision,” he says.
Honcker gives dealers the opportunity to display F&I however they want through the app’s dashboard, whether it’s “two or three lines or a basic description of the excess wear-and-tear policy ... or 800 lines,” Hecht says. The app also automatically factors the costs of the products selected into the customer’s monthly lease payment.
Even before he decided to add F&I products to his dealer group’s Honcker profile, Schmerling was already mentioning his two store’s F&I protections during initial phone conversations with Honcker customers who opted to have their vehicle delivered. Customers coming into the dealership still go through the normal F&I process. Either way, Schmerling believes talking through the benefits of F&I is important — app or no app.
“You still need that human touch,” Schmerling says. “You still need to have that conversation with the customer and explain the benefits of the product.
“People don’t understand what [F&I products] are,” he adds. “A run-flat tire can run anywhere from $400 to $650. And if you get a nail in a run-flat tire, you can’t plug them.”
Schmerling stresses that the customer on the other end of the Honcker app isn’t a lead; they’re a done deal. And there are certain expectations that come along with that.
“They’ve already made a decision,” he says. “They’re ready to buy a car, and you have to live up to their expectation that they are going to be contacted immediately and it’s going to be a seamless transaction.”
Oddly enough, the type of buyer McKenna attracts through the Honcker app isn’t someone who is actively trying to avoid the dealership. In fact, half of the dealer group’s Honcker customers opt to come in to sign the final paperwork. And on more than one occasion, customers have leased through Honcker from well outside the dealership’s delivery zone, in some cases driving several hours to pick up a car. The appeal, Schmerling thinks, is the streamlined experience Honcker provides, not the ability to skip the showroom.
His thinking is right in line with Hecht’s, who — although he readily admits to disliking the leasing process in the past — continues to strike a balance between customer expectations and dealer needs based on extensive feedback from Honcker’s growing dealer network.
“This is the future. There’s no question about it,” Hecht says. “It’s really about price and convenience. That’s the value prop for the customer — and for the dealership.”